The human tumor suppressor gene PTEN encodes a putative cytoskeleton-associated molecule with both protein phosphatase and phosphatidylinositol 3,4,5-trisphosphate (PIP3) 3-phosphatase activities. In cell culture, the lipid phosphatase activity of this protein is involved in regulating cell proliferation and survival, but the mechanism by which PTEN inhibits tumorigenesis in vivo is not fully established. Here we show that the highly evolutionarily conserved Drosophila PTEN homolog, DPTEN, suppresses hyperplastic growth in flies by reducing cell size and number. We demonstrate that DPTEN modulates tissue mass by acting antagonistically to the Drosophila Class I phosphatidylinositol 3-kinase, Dp110, and its upstream activator Chico, an insulin receptor substrate homolog. Surprisingly, although DPTEN does not generally affect cell fate determination, it does appear to regulate the subcellular organization of the actin cytoskeleton in multiple cell types. From these data, we propose that DPTEN has a complex role in regulating tissue and body size. It acts in opposition to Dp110 to control cell number and growth, while coordinately influencing events at the cell periphery via its effects on the actin cytoskeleton.